Alcohol, tobacco interests eyeing Michigan marijuana market

By John Schroyer

At a time when Michigan’s medical marijuana regulations are being written – and adult-use proponents are finalizing a legalization measure for the 2018 ballot – executives connected to the alcohol and tobacco industries have had a seat at the negotiating table.

It’s not yet clear how the alcohol and tobacco interests will be involved in the marijuana business.

But there are signs the tobacco industry is at least eyeing the retail end of the market. And MJ industry officials have raised the possibility that both tobacco and alcohol companies could be positioned to profit from secure wholesale transport of cannabis.

The scene in Michigan highlights how more established industries will likely insert themselves into the legalization process to gain a foothold in the multibillion-dollar cannabis industry.

Heather Azzi – an attorney with Marijuana Policy Project who was involved in the negotiations over what a Michigan rec legalization initiative for 2018 would include – said there’s already precedent for industries such as alcohol and tobacco getting a foothold in the marijuana business.

“There’s certainly a history of this. Those industries are keeping an eye on us, and are involved,” Azzi noted.

“In Nevada, the (2016 rec legalization) initiative there included an 18-month period whereby only applicants with experience in wholesale distribution of alcohol were authorized to apply for the distribution license.”

What’s happening

A representative for Wild Bill’s Tobacco – a chain of smoke shops in Michigan – and an owner of the Traverse City Whiskey Co. distillery both participated in negotiations that led this week to an agreement between multiple stakeholders involved in talks organized by MPP.

Those discussions led to an announcement on Tuesday from MILegalize – a group of Michigan activists that tried but failed to get a rec legalization measure on the 2016 ballot – that it would support MPP’s coalition and initiative.

Jared Rapp, an attorney and owner of the Traverse City Whiskey Co. and CEO of FRE Spirits, and Paul Weisberger, a lawyer for Wild Bill’s Tobacco, were directly involved in the talks, said both MILegalize organizer Jamie Lowell and spokespeople for the Coalition to Regulate Marijuana Like Alcohol, which is the 2018 rec campaign being run by MPP.

Rapp also represents “a few people who have interest in applying for (marijuana) growing licenses,” according to a coalition spokesman.

In an email to Marijuana Business Daily on Thursday, Rapp wrote that his involvement with the drafting process was “outside the scope of my relationship” with Traverse City Whiskey Co. and FRE Spirits, which he said have “no interest in the marijuana industry and no plans to enter the industry in any way at this time.” He noted that he maintains a private law practice and consultancy, and said that regarding the rec initiative negotiations, he was retained for his expertise in Michigan’s highly-regulated alcohol industry.

Weisberger, meanwhile, declined an interview request. But in May 2015 he told state lawmakers that Wild Bill’s Tobacco hoped to run a chain of “provisioning centers” – a legal term for MJ retailers in Michigan – with its company Oasis Wellness Center. He added that Wild Bill’s had already consulted with Michigan dispensary owners and marijuana companies in Colorado.

In January, Wild Bill’s donated $50,000 to the latest rec campaign under the company’s former name, Smokers Outlet Management, according to state records.

The campaign has raised a total of $128,100, according to its latest filing in February.

Rapp said his clients have no interest in getting into the cannabis transportation business. But he didn’t close the door on alcohol companies getting some type of marijuana industry permits, though he said to the best of his knowledge, no alcohol companies in Michigan are interested in getting into cannabis until it’s fully legal at both the state and federal levels.

“I think everybody who’s interested in business would be interested in getting into aspects of the (marijuana) business,” Rapp said. “Per my clients’ specific intentions, at this point I know the intention is to make sure we have a well-written law.”

Businesses not pulling strings

MPP’s Azzi said business interests are not pulling the strings when it comes to how the Michigan rec legalization measure was written.

“Various industry interests were represented on the drafting committee, but ultimately most of what they requested was not included because it was not the best policy for Michigan,” Azzi wrote in an email to Marijuana Business Daily.

Azzi also said that during a statewide “listening tour” that started in December, MPP convened stakeholders already interested in Michigan’s medical cannabis business to join negotiations over the 2018 rec initiative. That wound up including Rapp and Weisberger.

Josh Hovey, a spokesman for the Coalition to Regulate Marijuana Like Alcohol, dismissed the idea that alcohol and tobacco interests had an outsized voice over what was included in the proposed rec initiative.

“Has he weighed in and provided some input on the secure transport piece and how that would operate since he has some experience in that? Yes. Does he control how that language looks? Absolutely not,” Hovey said when asked about Weisberger’s role on the drafting committee.

Hovey noted the negotiations included Michigan NORML, the ACLU, the Michigan Bar Association and the National Patients Rights Association.

‘Secure transport’

At the heart of the disagreement over the rec initiative was a proposal for “secure transport” licenses alongside four other business license categories: cultivators, retailers, infused product makers and testing labs.

In early drafts of the initiative, secure transport licensees would have been required to show that they have experience in collecting products upon which excise taxes are levied – such as alcohol and tobacco – as well as experience in collecting these taxes.

That led some, including members of MILegalize, to speculate that stakeholders like Weisberger and Rapp were bending the ear of MPP to give their clients an advantage when it came to that particular sector.

Under those early drafts – which have since been changed because of pressure from MILegalize and others – cannabis growers and other businesses would have to pay for a third-party secure transport system. These would be separate companies licensed to ship cannabis between MJ businesses in the supply chain.

“The key is to make sure that (big business) doesn’t have all the control, and that the small mom-and-pop shops still have their place,” Lowell said.

MMJ law as precedent

Hovey said that the coalition took a cue from the state when it included the “secure transport” provision in its early drafts.

“If you look at the Michigan medical law that was just passed last year, that has secure transport in it, and we think it’s important to not be too different from that law, because it would add confusion for regulators, for law enforcement, for businesses operating in that space,” Hovey said.

Though the new Michigan MMJ law does call for “secure transporters,” the exact qualifications for such permits are still to be determined, said Colleen Curtis, an official with the Michigan Bureau of Medical Marihuana Regulation.

Right now, that question is a “hot topic” in Lansing, said Jenn Zielinski, a lobbyist for marijuana interests at the state capitol.

“There are a lot of different stakeholders that have a pretty vested interest in how the industry will be shaped for secure transporters. You’ve got the tobacco companies that have a play, and they want to have a stake in the market. But the intent with the (MMJ) legislation was to remove the distribution chokehold,” Zielinski said.

“I’m not saying that the tobacco companies are gunning for that right now, but it’s something that’s out there. They want a piece of the business, and everyone should be able to have an opportunity. But how the secure transport industry is going to shake out is really anybody’s guess.”

John Schroyer can be reached at [email protected]

Daily News | Dispensary/Retail Store Business News | Featured | Legal & Regulatory News for Marijuana Businesses | Michigan Medical Cannabis Business & Marijuana Legal News | Recreational Marijuana News

 7 Comments

  1. Brandon Strong April 27, 2017
    • t May 1, 2017
  2. Paula Givens, JD April 27, 2017
  3. Greg Natural April 27, 2017
  4. Mass. med patients April 28, 2017
  5. Morgan Glenn April 28, 2017
  6. R Bradley May 12, 2017

Leave a Reply

Your email address will not be published. Required fields are marked *

Please note: Comments are moderated by our editors who do their best to approve comments ASAP. As Marijuana Business Daily is focused on business, we approve comments that are specifically relevant to industry professionals. General opinions and questions about cannabis may not be posted.